The rise and fall of 'helicopter investors'

Some investors are hovering over their portfolios so much that they are being compared to helicopter parents. Above, Sikorsky’s A.J.S. Walia poses beside a model of Sikorsky S-92 helicopter on display at the India Aviation 2014 airshow. (Noah Seelamnoah Seelam, AFP/Getty Images)

You’ve heard of “helicopter parents” that micromanage their kids’ lives. Well, say hello to “helicopter investors,” folks that overly “(worry) about every twist and turn in the stock market — and react to them, potentially grounding their portfolios as a result.

In recent months traveling and speaking with financial advisers, Hooper kept hearing a common theme: of the clients willing to jump in and out of the market, an increasing number have started to “micro-manage their portfolios,” she says. “What’s most alarming is that some are pulling out of stocks at the first sign of trouble. Unfortunately they lack commitment.”

This type of mentality, Hooper adds, is not surprising given the trauma investors suffered during the 2007-09 financial crisis, which saw the worst stock market drop since the Great Depression. “Investors are far more risk averse,” she says.

Many investors now take less risk and are still skittish, despite a rising stock market over the past five years. The Federal Reserve’s aggressive and creative approach to monetary policy in the aftermath of the crisis has added to investors’ skittishness, Hooper says.

But micro-managing an investment portfolio comes with risks itself, she adds.

“These sudden moves could give investors whiplash,” Hooper argues. “Investors (need) to take a step back and not become too focused on day-to-day moves: otherwise emotion is likely to dictate their actions.”